How the US and Europe are diverging on the future of money

Competing visions of digital money

Notably, the US and Europe are diverging in their approach. The US is prioritising private-sector USD-backed stablecoins to bolster the dollar, while the European Union (EU) favours a centralised digital euro to safeguard sovereignty and financial stability. Stablecoins now occupy a unique position at the intersection of digital assets, foreign exchange, payments infrastructure and public policy.

Should they become widely adopted as money – serving as a unit of account, medium of exchange and store of value – their impact on the global financial system could be profound.

Stablecoins are digital assets issued by private entities and designed to maintain a stable value, most commonly pegged to the US dollar at USD 1. For stablecoins linked to traditional currencies, their value and appeal hinge on the issuer’s ability to redeem at face value and on public confidence in both the backing assets and the reference currency. In July 2025, the United States enacted the GENIUS Act (Guiding and Establishing National Innovation for US Stablecoins Act), establishing the first comprehensive federal regulatory framework for payment stablecoins.

The legislation requires one-to-one backing with high-quality liquid assets – such as cash, bank deposits, and short-term US Treasuries – mandates redemption at face value, imposes strict compliance requirements and creates clear licensing and oversight regimes. The law prohibits issuers from paying interest or yield to stablecoin holders and clarifies that compliant stablecoins are neither securities nor commodities, providing legal certainty that has strengthened institutional confidence.

The rise of regulated stablecoins

As of early 2026, the total market capitalisation of stablecoins stands at approximately USD 320 billion – a substantial increase from under USD 50 billion just a few years earlier, yet still modest compared with roughly USD 8 trillion in US bank deposits. By comparison, the broader crypto asset market has frequently exceeded USD 2 trillion. Optimistic analysts project that the stablecoin market could grow fivefold to twelvefold, reaching USD 2 trillion to USD 4 trillion by 2030. More conservative estimates anticipate steadier expansion in the hundreds of billions to low trillions.

Total stablecoin transaction volumes reached around USD 33 trillion to USD 35 trillion in 2025. However, these headline figures are dominated by crypto trading: actual payment-related flows for real-world economic use were estimated at only about USD 390 billion in 2025 – a tiny fraction of gross volumes and negligible relative to traditional payment systems such as Visa or Mastercard. Usage remains heavily concentrated in crypto trading and in the role of a digital dollar substitute or offshore store of value, particularly in emerging markets. Roughly 98% of stablecoins are dollar-denominated, and an estimated two-thirds of holdings are held by individuals in emerging economies.

Widespread adoption in emerging markets is likely to reinforce the international dominance of the US dollar. Stablecoins offer frictionless offshore access to dollar liquidity, lowering barriers to cross-border dollar usage and bypassing traditional banking channels. This can simultaneously weaken local currencies – through capital flight pressures or deviations from parity – while extending the dollar’s reach.

Stablecoins can complicate, if not weaken, monetary policy transmission. A large-scale shift from bank deposits into non-interest-bearing stablecoins may increase banks’ reliance on wholesale funding and, in some cases, sharpen the pass-through of policy rates. At the same time, unremunerated stablecoins blunt the interest-rate channel, since policy rate changes do not directly affect holders. In emerging markets, extensive use of USD stablecoins risks accelerating “real dollarisation,” whereby they begin functioning as a medium of exchange and unit of account. The result would be an erosion of local monetary sovereignty and a weakening of domestic policy transmission.

The fiscal implications of stablecoins are mixed. On the positive side, stablecoin issuers now hold around USD 200 billion worth of US Treasuries, making them the world’s 18th largest holders of US debt. Widespread adoption of stablecoins could boost demand for government debt and can modestly lower sovereign borrowing costs – providing governments with limited additional fiscal room. On the negative side, if stablecoins significantly replace physical cash, seigniorage profits – the revenue governments earn from issuing currency – would shift from central banks to private stablecoin issuers. Moreover, public blockchains can enable greater tax evasion or avoidance, while sudden runs on stablecoins could trigger forced sales of reserve assets – mainly Treasuries – potentially causing market disruptions and imposing fiscal costs on the government.

The rapid rise of US stablecoins, coupled with strong support from the Trump administration, has sparked questions and concerns within Europe. Euro-denominated stablecoins remain marginal, with a market capitalisation of less than EUR 500 million. While the United States has adopted a permissive legal framework, the EU has taken a notably stricter and more conservative path with the Markets in Crypto-Assets (MiCA) regulation (2024–25), which prioritises financial stability and the preservation of the EU’s monetary sovereignty.

The digital euro

The dominance of dollar-backed stablecoins in Europe and their potential impact on monetary sovereignty have prompted the European Central Bank (ECB) to voice concerns. In response, the ECB has proposed the digital euro as an alternative to stablecoins in the euro area. The digital euro is a central bank digital currency (CBDC) designed to give the public access to electronic central bank money, complementing traditional cash. Its primary aim is to ensure that citizens continue to have access to risk-free public money in an increasingly digital payments landscape, where cash usage is declining and retail payments are often dominated by private – and frequently non-European – providers.

The key objectives of the digital euro are to preserve the euro’s role as a monetary anchor and safeguard monetary sovereignty. The initiative also seeks to foster greater competition and innovation in the payments sector, promote financial inclusion and ensure that basic payment services remain widely accessible and affordable. The ECB would issue the digital currency, while commercial banks and payment service providers would handle distribution, customer onboarding and front-end services such as cards and mobile apps.

Economically, the digital euro could offer several benefits. It would provide a secure, standardised settlement asset with broad distribution, helping to maintain trust in central bank money in the digital era. It could also reduce payment costs, enhance the resilience of the payment system by introducing an additional payment rail and decrease reliance on non-European payment infrastructures. As Piero Cipollone of the ECB highlighted in a recent speech¹: “Nearly two-thirds of euro area card-based transactions are processed by non-European companies while 13 euro area countries depend entirely on international card schemes or mobile solutions for in-store payments.”

The digital euro also raises financial stability concerns. In times of market stress, households might rapidly shift funds from bank deposits into digital euros, potentially amplifying bank runs and pushing up banks’ funding costs. To mitigate such risks, the design under consideration includes individual holding limits and may feature tiered or zero remuneration relative to traditional bank deposits – measures central to balancing the goals of innovation, efficiency and financial stability.

US vs Europe: two roads to digital currency

While both stablecoins and the digital euro represent significant steps forward in the evolution of money, it seems unlikely that these innovations will fully replace existing payment systems in the foreseeable future. The divergence between the US and Europe is striking. The US has moved more quickly, embracing private sector stablecoins and fostering rapid adoption, whereas Europe has taken a more cautious, centralised approach with the digital euro expected to be launched in 2029. This difference in pace and philosophy reflects broader debates about monetary sovereignty and financial stability. Furthermore, the rise of digital currencies and stablecoins is closely linked to discussions around unconventional monetary policy tools, such as “helicopter money”, as both challenge traditional frameworks for distributing liquidity and supporting the economy.